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Which of the following best describes how a competitive market determines the price of a good?
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1. Introduction to Microeconomics
Introduction to Economics
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Which of the following statements best describes a trade deficit?
A
A country is not engaged in international trade.
B
A country is importing more than it is exporting.
C
A country is exporting more than it is importing.
D
A country has balanced exports and imports.
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Understand the concept of a trade deficit: it occurs when a country's imports exceed its exports over a certain period.
Recall that imports are goods and services purchased from other countries, while exports are goods and services sold to other countries.
Recognize that if a country imports more than it exports, it is spending more on foreign goods and services than it is earning from selling its own goods and services abroad.
This imbalance means the country is running a trade deficit, as it is effectively borrowing or using reserves to pay for the excess imports.
Therefore, the statement 'A country is importing more than it is exporting' best describes a trade deficit.
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